Firm-Specific Shocks and Aggregate Fluctuations

Leonid Karasik, Danny Leung and Ben Tomlin

Staff Working Papers from Bank of Canada

Abstract: In order to understand what drives aggregate fluctuations, many macroeconomic models point to aggregate shocks and discount the contribution of firm-specific shocks. Recent research from other developed countries, however, has found that aggregate fluctuations are in part driven by idiosyncratic shocks to large firms. Using data on Canadian firms, this paper examines the contribution of large firms to industry-level fluctuations in gross output, investment and employment in the manufacturing sector. The data suggest that shocks to large firms can explain as much as 46% and 37% of the fluctuations in gross output and investment, respectively, but do not contribute to fluctuations in employment.

Keywords: Business fluctuations and cycles; Firm dynamics; Market structure and pricing (search for similar items in EconPapers)
JEL-codes: E22 E23 E24 E3 L6 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2016
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:bca:bocawp:16-51

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